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Question 1 of 10
1. Question
Which of the following statements is /are true?
I. An asset which is less than a year old under short term capital gain is considered be ordinary income.
II. Long term capital are taxed anywhere between 10% to 15%.
III. Capital gain/losses are calculated with the formula=(sales price –adjusted cost basis ) – (commission)
IV. Capital gain/losses are calculated with the formula=(sales price –commission ) – (adjusted cost basis)Correct
Capital gains or losses are usually easily computed with following formula: Cap Gain/Loss = (sales price – commission) – (adjusted cost basis). Long-term capital gains are taxed at fifteen to twenty percent, depending on the investors’ total income.A short- term capital gain, or a capital gain from an asset held for less than one year, is considered to be ordinary income.
Incorrect
Capital gains or losses are usually easily computed with following formula: Cap Gain/Loss = (sales price – commission) – (adjusted cost basis). Long-term capital gains are taxed at fifteen to twenty percent, depending on the investors’ total income.A short- term capital gain, or a capital gain from an asset held for less than one year, is considered to be ordinary income.
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Question 2 of 10
2. Question
Tax basis is also referred as?
I. Regressive taxes
II. Progressive taxes
III. Adjusted cost basis
IV. Alternative minimum tax.Correct
The cost basis (also called tax basis) of an investment is the amount that the investor paid for the investment.
Incorrect
The cost basis (also called tax basis) of an investment is the amount that the investor paid for the investment.
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Question 3 of 10
3. Question
How is the capital gain/loss computed under the adjusted cost basis?
I. Adjusted cost basis – Sales price
II. Adjusted cost basis + Sales price
III. (Adjusted cost basis – Commission)- (Sales price)
IV. (Commission -Sales price) + (Adjusted cost basis)Correct
The adjusted cost basis is subtracted from the sales price to determine if a capital loss or gain occurred.
Incorrect
The adjusted cost basis is subtracted from the sales price to determine if a capital loss or gain occurred.
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Question 4 of 10
4. Question
What is the main purpose of alternative minimum tax?
I. It’s a percentage of income that a taxpayer pays after each level of income tax is paid.
II. High-income earners use this to form partnerships and municipal bonds to incur little to no tax burden
III. Prevent high-income earners from avoiding a reasonable amount of income tax.
IV. It’s a progressive tax rate that increases with increased income.Correct
The alternative minimum tax is a tax passed by Congress to prevent high-income earners from avoiding what Congress considers to be a reasonable amount of income tax.
Incorrect
The alternative minimum tax is a tax passed by Congress to prevent high-income earners from avoiding what Congress considers to be a reasonable amount of income tax.
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Question 5 of 10
5. Question
Which of the following statements are true?
I. Marginal tax rate is the final tax bracket.
II. Effective tax rate is a progressive tax rate that increases with increased income.
III. An investors marginal tax rate is higher than the effective tax rate.
IV. An investors marginal tax rate is same as his/her effective tax rate.Correct
The effective tax rate is a progressive tax rate that increases with increased income. The final tax bracket is the marginal tax rate. So while the investor’s marginal tax rate may be 28 percent, the effective tax rate is lower because the investor’s income that fell into the previous brackets was taxed at a lower rate.
Incorrect
The effective tax rate is a progressive tax rate that increases with increased income. The final tax bracket is the marginal tax rate. So while the investor’s marginal tax rate may be 28 percent, the effective tax rate is lower because the investor’s income that fell into the previous brackets was taxed at a lower rate.
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Question 6 of 10
6. Question
Which taxes are filed on IRS form 1041?
I. Estate Tax.
II. Trust Tax.
III.S Corporations.
IV. C Corporations.Correct
Estate and trust tax returns are filed on IRS Form 1041.
Incorrect
Estate and trust tax returns are filed on IRS Form 1041.
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Question 7 of 10
7. Question
Which statement holds true for estate taxes?
I. Estates are exempted from taxation up to a certain limit that differs year to year depending on the legislation.
II. Assets may be transferred to the deceased’s spouse in unlimited quantities without incurring tax.
III. The estates whose value is less than 5,60,000 is exempted from tax.
IV. The estates whose value is more than 5,60,000 is exempted from tax.Correct
Estates exempt from taxation up to a certain amount that varies year to year contingent on legislation. This exemption is usually over 5 million dollars ($5,600,000 as of 2018) and precludes many U.S. estate filers from taxation. Trusts do not benefit from the same exemptions from which estates benefit.
Incorrect
Estates exempt from taxation up to a certain amount that varies year to year contingent on legislation. This exemption is usually over 5 million dollars ($5,600,000 as of 2018) and precludes many U.S. estate filers from taxation. Trusts do not benefit from the same exemptions from which estates benefit.
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Question 8 of 10
8. Question
What is the similarity between a donated and inherited securities?
I. In the case of both donated and inherited security the cost basis is the fair market value of the security on the date of the deceased’s
death.
II. In the case of both donated and inherited security the price applied to the security is the cost basis of the original owner.
III. There is no difference in the taxation process.
IV. Patron receives the securities without making an investment in the securities themselves.Correct
The main similarity between donated or “gifted” securities is that an investor receives the securities without making an investment in the securities themselves. For taxation purposes, the basis of each type of donated or inherited security differs.
Incorrect
The main similarity between donated or “gifted” securities is that an investor receives the securities without making an investment in the securities themselves. For taxation purposes, the basis of each type of donated or inherited security differs.
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Question 9 of 10
9. Question
Which statement stands true for gift tax?
I. It is imposed by the federal government and is taxable at the state level
II. Lifetime gifting limit that an investor may gift without incurring tax is $5,600,000.
III.Payments made in the form of gift directly to medical and educational providers for qualified expenses are excluded from gift taxes.
IV. For an non US citizen there is no caping on the number of gifts.Correct
It is imposed by the federal government and generally not taxed at the state level. As of 2018, the lifetime gifting limit that an investor may gift without incurring tax is $5,600,000. In the case of a non-United States citizen, the gift will be limited. Gift payments made directly to medical and educational providers for qualified expenses are generally unlimited and excluded from gift taxes.
Incorrect
It is imposed by the federal government and generally not taxed at the state level. As of 2018, the lifetime gifting limit that an investor may gift without incurring tax is $5,600,000. In the case of a non-United States citizen, the gift will be limited. Gift payments made directly to medical and educational providers for qualified expenses are generally unlimited and excluded from gift taxes.
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Question 10 of 10
10. Question
When should be the form IRS 709 filed?
I. Spouses doubling the gift to the recipient without the giver or the recipient owing federal gift taxes.
II. In case of a trust it is mandate to fill this form for any income it might receive, as it often receives income in lieu of its originator.
III. When an investor may give up gifts worth $15,000 each year to any number of people.
IV. When gift payments are made directly to medical and educational providers.Correct
Regardless of whether or not gift tax is owed, spouses using the double or “split” rule must file IRS Form 709
Incorrect
Regardless of whether or not gift tax is owed, spouses using the double or “split” rule must file IRS Form 709